Portfolio overview

The Health portfolio works towards achieving better health and wellbeing for all Australians, now and for future generations. A total of 19 entities make up the portfolio.

The Department of Health is the lead entity in the portfolio. It is responsible for achieving the Australian Government’s health outcomes in the areas of health system policy, design and innovation; health access and support services; sport and recreation; individual health benefits; regulation, safety and protection; and ageing and aged care. This includes administering programs and services, such as Medicare and the Pharmaceutical Benefits Scheme, and forming partnerships with the states and territories, as well as other stakeholders. Further information is available from the department’s website at health.gov.au.

The remaining 18 entities in the portfolio are responsible for the delivery of programs, including aged care accreditation services, digital health reforms, the development and reporting of health and welfare data, nuclear safety, supporting the integrity of sport, funding medical research, managing blood supplies, cancer research, pricing and funding public hospitals, national safety and quality standards and clinical care standards, and food safety.

In the 2021–22 Portfolio Budget Statements (PBS) for the Health portfolio, the aggregated budgeted expenses for 2021–22 total $93.17 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through the annual appropriation Acts.

The level of budgeted departmental and administered expenses, and the average staffing level for entities in the GGS within this portfolio, are shown in Figure 1. The Department of Health represents the largest proportion of the portfolio’s expenses, and administered expenses are the most material component, representing 97 per cent of the entire portfolio’s expenses.

Figure 1: Health portfolio – total expenses and average staffing level by entity

Source: ANAO analysis of 2021–22 PBS.

Audit focus

In determining the 2021–22 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement. The ANAO also considers emerging risks from new investments, reforms or changes in the operating environment.

In the Health portfolio, strategic risks predominantly relate to service delivery through other entities, and governance issues. Since 2019–20, the department has led the government’s response to the COVID-19 pandemic, acting as the primary source of health advice. The pandemic environment results in heightened risks relating to the timeliness of data collection and analysis to inform response mechanisms, rapid policy development, stakeholder engagement, and record keeping of key decisions and inputs to those decisions.

Specific risks in the Health portfolio relate to governance, service delivery, grants administration and regulation.

Governance

The Department of Health implements a large number of national strategies and will need to further embed strong project management mechanisms that work across the organisation to achieve success. Audit work has identified challenges in recording and assessing implementation progress, monitoring the ongoing impacts of aged care policies, delivering value for money on large-scale investments, and monitoring the implementation and impact of the department’s programs.

The Department of Health manages the National Medical Stockpile, including procuring and deploying medical supplies, and is leading the rollout of the COVID-19 Vaccine and Treatment Strategy. These are significant logistical exercises that require effective governance, risk management, data analysis, communications and stakeholder management. Recent audit work has identified that planning for pandemic scenarios and the consideration of risks to effective deployment have not been optimal. Risk-based emergency response planning that incorporates contingencies and considers the full range of service providers and stakeholders can assist an entity to rapidly adapt service delivery to the requirements of an emergency response. Having scalable procurement, resource allocation and information technology (IT) systems supported by emergency response planning can also assist to rapidly adapt service delivery to the requirements of an emergency while minimising the impact on staff. Record-keeping practices and the quality of health and logistical data need to be improved to ensure transparency and facilitate assurance that public resources are being used properly.

The distribution of roles and responsibilities in the delivery of Australia’s health services requires ongoing collaboration between Australian Government entities, state and territory entities and a range of stakeholders in the private sector. This includes monitoring performance and outcome measures under intergovernmental agreements.

Service delivery

The Department of Health is heavily reliant on other entities for the delivery of programs, including through the administration of Medicare and aged care payments by Services Australia, administration of grants through the Department of Social Services and the National Health and Medical Research Council, and provision of digital health services through the Australian Digital Health Agency. The risks associated with these arrangements need to be actively managed by the department to ensure that service and quality control expectations are agreed and maintained, and that its business is appropriately prioritised, to provide assurance that policy objectives are being met.

The Department of Health is responsible for ensuring service providers comply with requirements for funded programs, including the Medicare Benefits Schedule and Pharmaceutical Benefits Schedule. A recent audit found that the department could take a more risk-based approach to provider compliance and improve its monitoring of outcomes.

Grants administration

Accuracy and occurrence of grant payments is a key risk, considering the significant number of grant programs that are administered by the Department of Health and other portfolio entities. Audit activity has highlighted risks where grant funding was not informed by an appropriate assessment process and sound advice, and from shortcomings in value-for-money assessments, and performance monitoring and reporting arrangements.

Regulation

Protecting the health and safety of the community through the regulation of health products and services is the responsibility of entities such as the Therapeutic Goods Administration, the Office of the Gene Technology Regulator and the Aged Care Quality and Safety Commission. For regulators operating under charging arrangements, the application of cost recovery principles involves recovering the efficient costs of activities.

Financial statement audits

Overview

Entities within the Health portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Health portfolio entities and risk profile

 

Type of entity

Risk of material misstatement

Number of higher risks

Number of moderate risks

Material entities 

Department of Health

Non-corporate

Moderate

4

4

National Blood Authority

Non-corporate

Low

0

1

National Health and Medical Research Council

Non-corporate

Low

1

1

Non-material entities 

Aged Care Quality and Safety Commission

Non-corporate

Low

 

 

Australian Commission on Safety and Quality in Health Care

Corporate

Low

Australian Digital Health Agency

Corporate

Moderate

Australian Institute of Health and Welfare

Corporate

Low

Australian National Preventive Health Agency

Non-corporate

Low

Australian Radiation Protection and Nuclear Safety Agency

Non-corporate

Low

Australian Sports Commission

Corporate

Low

Sport Integrity Australia

Non-corporate

Low

Australian Sports Foundation Limited

Company

Low

Cancer Australia

Non-corporate

Low

Food Standards Australia New Zealand

Corporate

Low

Independent Hospital Pricing Authority

Corporate

Low

National Health Funding Body

Non-corporate

Low

National Mental Health Commission

Non-corporate

Low

Organ and Tissue Authority

Non-corporate

Low

Professional Services Review Scheme

Non-corporate

Low

     

Material entities

Department of Health

The Department of Health is responsible for achieving the Australian Government’s health and ageing policy priorities through evidence-based policy, program administration, research, regulatory activities, and partnerships with other government entities, consumers and stakeholders.

The department’s total budgeted expenses for 2021–22 are $89.53 billion, with 63 per cent of these expenses attributable to personal benefits payments (Figure 2).

Figure 2: Department of Health’s total budgeted expenses by category ($’000)

Note a: Employee benefits, supplier expenses, payments to corporate Commonwealth entities, writedown and impairment of assets, interest on right-of-use assets, depreciation and amortisation, and other expenses

Source: ANAO analysis of 2021–22 Portfolio Additional Estimates Statements.

There are eight key risks for the department’s 2020–21 financial statements that the ANAO has highlighted for specific audit coverage, including four risks that the ANAO considers potential key audit matters (KAMs).

  • The payment of aged care subsidies to nursing home providers based on Aged Care Funding Instrument assessments prepared by the same providers. These payments involve judgements regarding the level of care. (KAM – Accuracy of payments of personal benefits and subsidies)
  • The complexity and high volume of transactions processed by Services Australia on behalf of the Department of Health using ageing IT systems for personal benefit payments, including the Medicare Benefits Scheme (Medicare), the Pharmaceutical Benefits Scheme (PBS) and the private health insurance rebate. (KAM – Accuracy of payments of personal benefits and subsidies)
  • The calculation of provision for Medicare and PBS service claims where the service or product has been received by a patient from a medical professional but the Medicare and PBS payment has not yet been claimed or paid. The provision is based on complex judgements that involve timings of future cash flows, discount rates and estimation of timings when these provisions will be settled. (KAM – Accuracy and completeness of personal benefits provision)
  • The accounting for the National Medical Stockpile. There has been a significant increase in purchasing and disbursement activity of items in the stockpile, which includes personal protective equipment and vaccines during the COVID-19 pandemic. The increase in purchasing activity over a relatively short period increases risks to the existence, completeness and accuracy of items in the National Medical Stockpile. (KAM – Accuracy, existence and completeness of National Medical Stockpile)
  • The estimation of revenue under the Therapeutic Goods Act 1989, which involves judgements and assumptions related to the assessment of application, assessment and inspection fees, and associated exemptions.
  • The complexity and judgements involved in calculating Pharmaceutical Benefits Scheme drug recovery revenue using data sourced from Services Australia.
  • The estimation of outstanding claims under the medical indemnity schemes, which involves complex assumptions and judgements.
  • The management of, and accounting for, a range of grant payments maintained through multiple systems and arrangements.

National Blood Authority

The National Blood Authority (NBA) is responsible for securing the supply of safe and affordable blood products, including through national supply arrangements and coordination of best practice standards within agreed funding policies under the national blood arrangements.

The NBA’s total budgeted expenses for 2021–22 are over $1.48 billion, with 99 per cent of these expenses attributable to supplier expenses, as shown in Figure 3.

Figure 3: National Blood Authority’s total budgeted expenses by category ($’000)

Source: ANAO analysis of 2021–22 PBS.

The key risk for the NBA’s 2020–21 financial statements relates to significant judgements and assumptions involved in the valuation of blood and blood products, which are reported as assets.

National Health and Medical Research Council

The National Health and Medical Research Council (NHMRC) is the Australian Government’s key entity for managing investment in, and integrity of, health and medical research. NHMRC is also responsible for developing health advice for the Australian community, health professionals and governments, and for providing advice on ethical practice in health care and in the conduct of health and medical research.

NHMRC’s total budgeted expenses for 2021–22 are just over $941 million, with 92 per cent of these expenses attributable to grants, as shown in Figure 4.

Figure 4: National Health and Medical Research Council’s total budgeted expenses by category ($’000)

Source: ANAO analysis of 2021–22 PBS.

There are two key risks for NHMRC’s 2020–21 financial statements.

  • The management of, and accounting for, a range of grant payments, which constitute a significant expense reported in NHMRC’s financial statements and are susceptible to fraud.
  • The judgements and assumptions involved in the management of non-financial and intangible assets, due to the development of a new grants management system.

Potential audits

Potential Performance audit: 2021-22
Activity
Potential Performance audit: 2021-22
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Potential Performance audit: 2021-22
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Potential Performance audit: 2021-22
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In progress audits

Performance audit (Report preparation)
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Performance audit (Report preparation)
Performance audit (Report preparation)
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